Friday, July 31, 2009

On Charity and Truth – from/to Stefano Zamagni

Stefano Zamagni, professor of economics at Bologna University, has commented via e-mail (in Italian) on my post on the recent encyclical Caritas in Veritate (Love in Truth, or Charity in Truth): The Vatican Road Is Paved With Good Intentions, Thursday 16 July 2009. He kindly expressed his interest and appreciation and gave his immediate responses. His original e-mail is reproduced at the end of this post.

Veritas in Caritate and its inverseFirst, Zamagni considers my writing "about Love in Truth and its apparently equivalent inverse, Truth in Love". He argues that “the difference between the two is great and therefore there is no equivalence. Caritas in Veritate means the affirmation of primacy of the good over the truth and the just (Aristotle); Veritas in Caritate instead means following Plato, who affirmed the primacy of the true over the good and the just. A herd of philosophers has debated at length on this theme: they should not be ignored”[“the just” seems to have been misplaced the first time it occurs, but there is no ambiguity, DMN] . The Encyclical states, at the very beginning, “… the need to link charity with truth not only in the sequence, pointed out by Saint Paul, of veritas in caritate (Eph 4:15), but also in the inverse and complementary sequence of caritas in veritate” (para. 2). I only meant to say that the notions of caritas in veritate and its inverse were equally plausible. I suppose that strictly speaking both I and Zamagni are wrong here: we should have both spoken of complementarity, instead of equivalence (DMN) or opposition (SZ).

Superfluous versus overabundantSecond, Zamagni points out that “The concept of overabundance is philosophical and not economic. It has nothing to do with the notion of superfluous as we use it today. Thomas Aquinus devotes two chapters of his Summa to explain the difference”. The fact is that in the New Oxford Dictionary of English (the language of the official version of Caritas in Veritate used in my post) superfluous means “unnecessary, especially through being more than enough”, overabundant means “excessive”, while abundance is “a very large quantity of anything”, and all have similar roots meaning overflowing: respectively super-fluere and abundare. Anybody giving uncommon meanings to common words has the duty to indicate in what ways they depart from standard uses, under penalty of being misunderstood without redress.

“Civil markets”

Third, Zamagni says that I have missed the central point of the encyclical. The true, great novelty of Caritas in Veritate, he claims, is the proposition that “the civil market economy should not be confused with the capitalist economy. The civil market is the genus, the capitalist market is one of its species. The market is a way of organising economic activity; capitalism is a model of society – as Marx taught. Finally, the civil market was born at least three centuries before capitalism, as all the great historians have long recognised. Thus what Caritas in Veritate says is that, in today’s conditions, we can and we should go back to the civil market economy, whose characteristic is the inclusion of the reciprocity principle into the economic sphere, in addition to (not instead of) the other two founding principles: the principle of the exchange of value equivalents and the principle of redistribution. The difference between civil markets and capitalist markets has not been realised precisely because until a few years ago economists have continued to think that the exchange of equivalents was the same thing as reciprocity (see S. Kolm, Reciprocity, CUP, 2008)”.

I confess that I have not ever heard before the term “civil market”, which I can only take to mean a market tout court – unless it is a market that is not “incivil” in the sense of being monopolistic and generating unemployment, poverty, inequality and environmental destruction. Markets do not lend themselves to qualifiers other than those indicating their object (e.g. financial markets) or their degree of competition, such as competitive/oligopolistic/monopolistic, regulated/unregulated. In his encyclical Benedict XVI never speaks of a “civil market”, no wonder I missed it. If you Google “mercato civile” you find references either to the civilian/military dichotomy or to recent publications authored/co-authored by Stefano Zamagni; if you Google “civil market” you get masses of references almost exclusively of the first kind. This again indicates a rather idiosyncratic, maybe formerly common but now obsolete, personal usage of these terms. Words can change the world by inspiring human action, not by the manipulation of concepts and labels.

“Civil economy”

Benedict XVI does mention “civil economy” in Caritas in Veritate, in the context of the relationship between business and ethics. “In recent decades a broad intermediate area has emerged between the two types of enterprise [profit-based companies and non-profit organizations]. It is made up of traditional companies which nonetheless subscribe to social aid agreements in support of underdeveloped countries, charitable foundations associated with individual companies, groups of companies oriented towards social welfare, and the diversified world of the so-called “civil economy” and the “economy of communion”. This is not merely a matter of a “third sector”, but of a broad new composite reality embracing the private and public spheres, one which does not exclude profit, but instead considers it a means for achieving human and social ends. Whether such companies distribute dividends or not, whether their juridical structure corresponds to one or other of the established forms, becomes secondary in relation to their willingness to view profit as a means of achieving the goal of a more humane market and society. It is to be hoped that these new kinds of enterprise will succeed in finding a suitable juridical and fiscal structure in every country. Without prejudice to the importance and the economic and social benefits of the more traditional forms of business, they steer the system towards a clearer and more complete assumption of duties on the part of economic subjects. And not only that. The very plurality of institutional forms of business gives rise to a market which is not only more civilized but also more competitive.” [para. 46]. This is not a new dawn, it is something that “is to be hoped”, and really not all that much to go by.

In his lecture Dal mercato capitalistico al mercato civile(15/9/2008) Stefano Zamagni advocates “… transforming the capitalist market to a civil market. This is not a Darwinian market, like the capitalist market that tends to reward the best and marginalize the less efficient. This is not acceptable... I propose a return to the spirit of the origins when the market was born, so as to resolve the embarrassment of riches and avoid the stagnation of the circuit of wealth production and of distribution so as to include all”. In practice, this involves 1) “opposing the financialisation of the economy by means of alternative financial instruments,” raising the share of “ethical finance controlling today 20% of global transactions” [he gives no definitions and no source]. 2) Microcredit, which he says was first practiced by the Franciscans in the XV century; 3) Fair trade [commercio equo e solidale] initiatives, which Zamagni recognizes to be stagnant at the moment. In truth, again, not much to go by.

Of course – at least in principle if seldom in practice – markets can be used by economic systems other than capitalism, but neither Benedict XVI nor Stefano Zamagni characterise a new economic system, or even a significantly reformed capitalist system. I would be very interested in Stefano Zamagni fleshing out in significantly greater detail the market system he has in mind (or pointing at the relevant literature). Is it a pre-capitalistic system? Is it a globally regulated market system, especially for financial instruments? Are "civil markets" segmented; are prices controlled; do markets clear? Who picks the winners in a non-Darwinian system? Is there a role for collective and/or state ownership and entrepreneurship? Who re-distributes what to whom? What is the transition path that might lead us there from where we are now? Hopes alone do not change the world.

Value, Profit, Non-Profit

The notion of an intrinsic value of commodities, distinguished, and therefore possibly diverging, from their market prices, involves the imposition of an arbitrary and therefore indeterminate set of values. In the last twenty years the price of oil varied between $9 and $148 a barrel: at what point and in terms of what, was it at or closest to equivalent exchange value?

Marx talked of relative values for the purpose of asserting the existence of exploitation even if profit made relative prices diverge from relative labour values (the labour actually embodied in commodities, directly and indirectly) and was not talking of those values as a basis for equivalent exchange (an improper use to which his epigones put the labour theory of value). I respect Serge-Christophe Kolm’s work, particularly his Caffè Lectures on Reciprocity, but I find it of limited application here (and, frankly, in most other areas of real economic policy).

Zamagni goes on to say that “This is why the approach of Mauss and that of non-profit institutions has nothing to do with the current of thought of the civil economy – which is typical of the Italian Enlightment: the Milan School (Beccaria, Verri, Romagnosi) and the Naples School (Genovesi, Galiani, Dragonetti)”. He is also surprised at being classed as a supporter of non-profit institutions, against which he has been fighting for many years. His objection is that the non-profit approach “views capitalism as something that is there and should not be touched; state failures and market failures are there and non-profit institutions have the role of patching the system and calming street protests. Whereas the idea of the civil economy is that of changing the capitalist logic from inside in order to go beyond it, which is probably what young Marx had in mind before getting bogged down with the so-called Transformation Problem”. “This is the true ‘revolutionary’ road in the present circumstances, … while left wing politicians (including the extreme left) continue to invoke and hope for a real revolution which they know will never be realised, and right wing politicians continue to support the purely cosmetic non-profit approach and corporate philanthropy.”

I am sure I am not the only person who associates Stefano Zamagni’s work with the non-profit approach, not least in view of his interview on Italian radio on 7 July, but I stand corrected. Yet I cannot regard his as a revolutionary road, for the little he has given us of his destination is only a marginal reform of the capitalist system.

Is the Church concerned with its own laicity?

Finally, Zamagni notes that “The Church does not want to, and should not, put forward concrete action proposals” like the ones suggested in the last paragraph of my post, for “that would be a patent violation of the principle of laicity [laicità], as understood by Rawls and Habermas.” I do not expect my suggestions should be ever entertained by the Church, which is fair enough, but frankly I do not see how the actions I recommend would contravene the principle of laicity, when the diametrically opposite actions actually taken by the Church are not thought to contravene it. Moreover, the Church does not seem to me to be concerned with maintaining its own laicity in the first place.

Traduttore traditore, possibly. So, for the benefit of my Italian readers, and for the record, I reproduce here the original text of Stefano Zamagni’s e-mail, for which I thank him hoping that he might be induced to comment further.